Question

A company has 10,000 shares of 7% preferred stock issued and outstanding. The preferred stock has...

A company has 10,000 shares of 7% preferred stock issued and outstanding. The preferred stock has a par value of $100 per share. This means that:

A. If the Board of Directors declares a dividend, the potential dividend will be $7 for each preferred share.

B. The firm is obligated to buy-back the preferred shares at a 7% markup above the par value.

Homework Answers

Answer #1
A company has 10,000 shares of 7% preferred stock issued and outstanding. The preferred stock has a par value of $100 per share. This means that:
A. If the Board of Directors declares a dividend, the potential dividend will be $7 for each preferred share.
Option B. is wrong since the preferred stock will have preference over common stock and will be paid a fixed rate of dividend.
There is no obligation for the firm to buy-back preferred shares at a fixed markup
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